Graduates are overpaying their student loans by up to £10,000

FORMER students could be overpaying their loans by as much as £10,000, the Government has admitted.

Chris Skidmore, the universities minister, has urged graduates to switch to a direct debit, rather than automatic repayments, as they approach the end of their loan repayment to “ensure a smooth end” and avoid repaying “more than they should”.

In 2016-17, 85,000 graduates paid off more than they owed and 40 people overpaid by more than £10,000.

Just 34 per cent of eligible graduates paid their final loan repayments via direct debit, with the majority risking overpayment by continuing automatic deductions from their salary.

Mr Skidmore said: “With more and more people enjoying the benefits of a university education, it’s only right that graduates have easy access to the information they need about repaying their student loan.

“The Government is investing in the student loans system to make it as simple and easy for people to use as possible. I urge all graduates to use this new service and to join the direct debit scheme as they approach the end of their loan to ensure a smooth end and not repay more than they should.”

Mr Skidmore’s warning comes as the Department for Education announces a system overhaul at the Student Loans

Company (SLC), aimed at modernising the repayment system.

Previous restrictions on data sharing between the SLC and HM Revenue and Customs caused some graduates’ salary reductions to continue for the rest of the financial year, even after they had repaid their loans.

Now, legislation introducing frequent data sharing will allow SLC and HMRC to exchange information on repayments weekly rather than annually.

Graduates will also be able to check up on their student loans through an online payment system which will largely replace annual paper statements.

A new online repayment service is due to start next year, which will allow former students to get up-to-date information and manage their student loan balance.

Gavin Williamson, the Education Secretary, said the changes would simplify the repayment process.

He said: “Student loans can remain part of graduates’ lives for many years, so it’s only right we do all we can to improve the system for them. These changes will make it easier for students to understand their balance, manage their loan and avoid over-repaying.”

Students can take out loans to pay for tuition fees, which can cost up to £9,250 a year in England, and living costs. From April next year, graduates will start paying back their loans once they are earning £26,575 a year.